CORRECTED-Raise water spending, get $1.0 trillion benefits - U.N.

OSLO Nov 27 (Reuters) - Sharply higher spending on water
supplies, twinned with a crackdown on corruption, would yield
more than a trillion dollars a year in economic, health and
environmental benefits, a U.N.-backed study said on Wednesday.

"Corruption is the elephant in the room" for improved water
supplies, said Zafar Adeel, director of the U.N. University's
Institute for Water, Environment and Health, which was a
co-producer of the report.

The study said investments of $840 billion to $1.8 trillion
a year, or up to about 2.2 percent of world gross domestic
product, would be needed over 20 years to provide universal
access to safe drinking water and sanitation and to improve
other services such as irrigation and hydro power.

That would mark a sharp rise from the current $500 billion
invested each year but yield benefits of at least $3.0 trillion
a year, or more than $1.0 trillion above the highest projected
spending, it said.

Benefits would include "direct economic return, livelihood
creation, health system savings, and the preservation of
nature's ecosystem services", according to the study, which said
it was the first long-term estimate for water costs.

Adeel told Reuters the benefit and cost estimates were
intended to help debate about water, a sector that faces strains
from a rising world population, pollution and climate change.

DRINKING WATER

Almost 2.5 billion of the world's 7 billion people lack
access to sanitation, and about 770 million lack safe drinking
water, U.N. data show.

The report cited a 2008 study by Transparency International
that said about 30 percent of spending on water-related
infrastructure in developing nations today is lost to
corruption.

Transparency International said, for instance, that aquifers
in 90 percent of Chinese cities were polluted because of lax
enforcement of environmental laws. In Mexico, it said irrigation
subsidies were skewed towards the biggest farmers.

"I've no indications that the fight against corruption,
except perhaps for some small cases, has made much progress"
since 2008, said Teun Bastemeijer, director of the Water
Integrity Network in Berlin, which has ties to Transparency
International.

"Much of the impact of this corruption falls on the poor and
those without access to water," according to Wednesday's report,
produced with the U.N. Office for Sustainable Development and
the Stockholm Environment Institute.

Adeel said that companies and aid agencies could try to
invest directly in local projects in developing nations,
bypassing central governments, to limit the risk of corruption.

Major companies in the water sector include France's Veolia
and Suez, and Xylem Inc and GE Water
of the United States. All say they try to stamp out
corruption.
(Editing by Mark Trevelyan)